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Canada cuts wheat crop hopes - upbeat on durum, oat prices
Aug. 25, 2017
Canada cut its forecasts for canola and wheat production - particularly of durum, for which it raised price expectations - while flagging a "bullish outlook" for oat futures, thanks to near-record-low North American supplies.
Canada's farm ministry, AAFC - citing "drought-like dry conditions in some parts" of the important Prairies growing region, downgraded by 1.1m tonnes to a five-year low of 27.3m tonnes its forecast for the domestic all-wheat harvest.
The revision reflected in particular weaker expectations for output of durum, the type of wheat used in making pasta, and for production hopes were cut by 700,000 tonnes to 5.0m tonnes, which would also represent a five-year low.
"Durum crop conditions have deteriorated since the July report due to low precipitation," said the ministry, whose comments follow weak ratings from ag officials in Saskatchewan, the top growing province.
"Low precipitation in the durum-growing areas" will see the durum yield come in at a "lower-than-trend" 2.42 tonnes per hectare, a cut of 0.34 tonnes per hectare on last month's forecast.
'Less competition in world markets'
The downgrade comes at a time of softer expectations for output in some other major growers too, including the US, where dryness has also been an issue for the main producing regions, in the northern Plains.
Indeed, the ministry raised by 200,000 tonnes to 4.90m tonnes its forecast for Canadian durum exports in 2017-18 despite the weakened expectations for the domestic harvest.
"Exports are forecast to rise 9% due to less competition in world markets from the European Union and the US because of lower production, and assuming a return to normal quality for the Canadian durum crop", after rain damage to last year's harvest.
Price prospects
The prospect of weaker output, and growing export demand, spells support for durum prices, with the AAFC raising its forecast for average values of the grain in Saskatchewan in 2017-18 at Can$270-300 a tonne, from a previous estimate of Can$260-290 a tonne.
Prices averaged Can$275 a tonne in 2016-17, on an August-to-July basis.
By contrast, against a backdrop of falling global prices of other wheat classes, undermined by a series of upgrades to Russia's harvest, the ministry trimmed to Can$260-290 a tonne, from Can$270-300 a tonne, its forecast for non-durum wheat prices in Saskatchewan in 2017-18.
Even so, "the lower US and Canadian wheat supply" overall will mean higher prices than the Can$235 a tonne achieved last season.
'Remarkably drought tolerant'
For canola, the ministry cut its harvest forecast by 400,000 tonnes to 18.6m tonnes, in line with market expectations ahead of the results of a farmer survey due at the end of this month.
However, this would still represent record harvest, supported by highest-ever sowings of 9.15m hectares, with AAFC, trimming its yield forecast by 0.05 tonnes per hectare to 2.03 tonnes per hectare, flagging the resilience of modern seed.
"Historically, the hybrid varieties grown across Western Canada proved to be remarkably drought tolerant," said the ministry, keeping at Can$500-540 a tonne its forecast for Canadian prices, in Vancouver, in 2017-18.
Last season, values averaged Can$529 a tonne.
'Bullish price outlook'
By contract, the ministry forecast an improvement this season in oat prices, to Can$2.20-2.50 a tonne as measured by Chicago futures, from the Can$209 a tonne recorded in 2016-17, thanks again to a mix of weakened production expectations, but resilient export prospects.
AAFC, while cutting its forecast for domestic oats output by 198,000 tonnes to 3.30m tonnes, kept its export expectations at an elevated 2.53m tonnes.
"Exports of oat grain and product exports to the US are forecast to increase by a total of 2% close to a 10-year high."
Flagging a downgrade earlier this month by the US to its own crop hopes, the AAFC said that North American supplies of the grain overall are expected to fall "near record lows".
"For 2017-18 crop year, the price outlook for the US oat futures remains bullish."
Source: Agrimoney
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